Apple Cancels Plans to Boost iPhone XR Production

The iPhone XR may not be selling as well as Apple hoped.                  Ian Knighton  CNET

The iPhone XR may not be selling as well as Apple hoped. Ian Knighton CNET

According to a report by Nikkei Asian Review, the Cupertino, California based company has asked its top smartphone assemblers- Foxconn and Pegatron- to halt the production lines dedicated to the low-priced iPhone.

The Nikkei, citing supply chain sources, said Apple had also asked smaller iPhone assembler Wistron Corp to stand by for rush orders, but the firm would receive no planned orders for the iPhone XR this season. Apple was down 0.5% in premarket U.S. trading on Tuesday.

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According to the report, Apple is now requesting more production of the older iPhone models including iPhone 8 and iPhone 8 Plus. Even more alarming, the report claimed that overall production might drop by as much as 25%. And then there is the "affordable" iPhone XR that starts at Rs 76,900 for base model, and goes all the way up to Rs 91,900.

This information may help explain why Apple provided a dim forecast for iPhone sales in the current quarter. Reportedly, Apple told Foxconn it does not need the extra lines. Ives wrote. "To this point, we continue to believe despite extremely poor communication and what should have been a much more phased approach toward taking away long standing unit metrics the Street has relied upon, that Cook & Co. decided now was the time to rip off the Band Aid and stop giving these quarterly numbers heading into another major iPhone product cycle".

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With regards to the growing uncertainty caused by the US-China trade disputes, Tung said Pegatron, being a technology company with global deployments, does not see it necessary to relocate its production capacity completely out of China, noting that a 3% capacity relocation might be sufficient.

The success of the iPhone X and its positive impact on Apple's MSRPs is proof that the company had margin to spare when it came to raising prices, but there were inevitably going to be customers left behind by such a move. Other reason might be that Apple doesn't want investors and customers to keep on waiting for another successful 2015 when the company reached 231.22 million units sold. Most people don't buy as I do. However, Apple did indicate that it's a feature that will be part of all future iPhones, which has brought last year's gleaming iPhone models to suffer from the same wrath.

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Earlier this week, a somewhat sketchy report surfaced claiming that Apple told its manufacturing partners to reduce iPhone XR production due to lower than anticipated demand. This news arrives shortly after Apple has made a decision to stop sharing units sales on individual product lines.

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